The communications regulator Ofcom is planning its largest-ever auction of mobile phone spectrum in 2012 with the aim of enabling high-speed internet connectivity around the UK while also guaranteeing competition.

The rights to "fourth generation" (4G), also known as "Long-Term Evolution" (LTE), radio spectrum – which enables connections at speeds of up to 100Mbps, about 25 times faster than the average broadband connection now in use at home – will be auctioned off in five chunks. Ofcom says that to guarantee competition in the future market it will limit both the minimum and maximum amounts of spectrum that any bidder can win.

That, it says, should ensure that a balance of competition is maintained between the existing four mobile networks – Vodafone, Everything Everywhere (Orange and T-Mobile), O2 and 3.

The spectrum to be auctioned is being freed up by the "digital switchover" from analogue to digital TV which is being rolled out across the UK now.

The UK was one of the first countries to auction off 3G spectrum in 2000, which raised £22bn. However it has since fallen behind other countries, where 4G LTE systems have been installed and used: in the US the Verizon network has this year introduced LTE connectivity, and Germany has had a successful auction of frequencies that can be used for it. In the UK the auction was delayed by mobile phone companies which objected to Ofcom proposals for the auction.

Despite offering a larger amount of bandwidth – about 180MHz of spectrum split between the 800MHz, 1.8GHz and 2.6GHz frequencies – the 4G auction is not expected to raise anything close to the amount raised by the 3G auction of 100MHz of bandwidth. Mobile networks are more cautious now about spending projections, although 4G connections could enable high-speed connections almost all over the country.

A key factor will be which companies gain access to low-frequency bandwidth around the 800MHz mark, which is more effective for connections over long distances such as in rural areas. The higher-frequency bandwidth will be more effective for higher-speed connections over short ranges, such as cities.

Two of the mobile operators, 3 and Everything Everywhere (the combined Orange and T-Mobile) protested in January, after Ofcom allowed the two oldest networks, Vodafone and O2, to "re-farm" low-frequency spectrum that they had been allocated when the mobile networks were first set up in the 1980s for 3G connections. The other two networks, and especially 3, which gained its bandwidth at the 3G auction in 2000, say that gives the two older networks an unfair advantage in the race to offer 4G.

However Ofcom does not seem to have allowed for this in its rules for the auction.

"Our role as the independent regulator is to award this spectrum in a way that secures the best use of the spectrum for the benefit of citizens and consumers in the UK," the Ofcom chief executive, Ed Richards, said.

"That is why we are proposing to design the auction in a way that not only encourages investment but also promotes competition and delivers wide coverage of services."

The auctions will have "floors" that will mean that auctions in which at least four companies do not win enough spectrum to provider higher-quality data services will be re-run. There will also be "caps" on the amount of low-frequency spectrum that any bidder can win, and on the total amount of spectrum any bidder can win.

Ofcom is running a consultation on the terms of the auction on its website.